Tax Debt: 4 Steps to Handle Your Debt

Got tax debt? Tax Network USA can help you.

In just 4 simple steps, you can handle your debt with minimum stress. If you want to pay your debt in full, apply for a payment plan or Offer in Compromise – you will be able to find information on how to do that in this article.

Before tackling that debt though, let us understand what having tax debt means and how to know if you have tax debt.

What is tax debt?

Tax debt is when you have unfiled or unpaid taxes owed to the IRS.

How do you know if you have tax debt?

If you are not sure if you owe the IRS money, there are four different way you can figure that out by phone, online, in person, or by mail.

  • Online – You can check using the IRS website
  • In Person – Locate your nearest IRS office using the IRS office locator
  • Phone – Call the IRS at 800-829-1040 Monday through Friday 7:00 AM to 7:00 PM local time
  • Mail – If you have received letters from the IRS than you likely have tax debt. You can send in a letter to the IRS – locate your local IRS office for the correct outgoing address for your location.

How do I handle my tax debt?

1. File your taxes with the IRS

2. Arrange a payment plan


3. File an Offer in Compromise (Form 656)

4. Speak with a Tax Specialist at Tax Network USA.

How can I get my tax debt forgiven?

In order to get a portion of your tax debt forgiven, you will need to file an Offer in Compromise with form 656. It is not guaranteed that the whole sum will be forgiven completely, but you may be able to get a portion of the debt dissolved.

You can find form 656 on the IRS website.

What is form 656?

Form 656 is the form for the Offer in Compromise program.

Sample of Form 656

According to the IRS,

“An Offer in Compromise (offer) is an agreement between you (the taxpayer) and the IRS that settles a tax debt for less than the full amount owed. The offer program provides eligible taxpayers with a path toward paying off their tax debt. The ultimate goal is a compromise that suits the best interest of both the taxpayer and the IRS. Generally, you must make an appropriate offer based on what the IRS considers your true ability to pay.”

If you have more questions about Offer in Compromise you can view the article, Tax Debt Compromise Program: Do You Qualify?

Does the IRS ever forgive tax debt?

It does happen, but it is unlikely that the IRS will forgive the full amount of the debt. The best chance for a partial forgiveness is to file form 656 mentioned above.

How does tax debt relief work?

If you cannot pay your debt in full, you will be put on a payment plan. This will break your payments down over a certain period, causing you to have smaller monthly payments. Although, you may end up paying more over time with interest – but is still a plausible way to handle the debt.

How long do I have to pay tax debt?

This will differ for each case. It depends on the payment plan that you have arranged with the IRS.

Speak with a Tax Specialist at Tax Network USA for answers to your specific questions.

What if I cannot afford to pay my tax debt?

If you cannot afford to pay your tax debt, you will have to set up a payment plan with the IRS. You can set up a payment plan on the IRS website.

Apply for Payment Plan

How do I set up a payment plan with the IRS?

To set up a payment plan, go to the IRS website and fill out an application. The application will differ based on if you are an Individual, Individual POA, a Business, or Business POA.

Now that you know what steps you must take to settle your tax debt, speak with a tax expert at Tax Network USA to help answer any questions you may have.


About The Author


Senior Tax Analyst at Tax Network USA

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